Canada’s Telecommunications Competition Mess

It was an interesting summer for Canadian telecommunications policy watchers. First, the Minister of Industry prevented the sale of Mobilicity to Telus (as I write, the press is reporting that the Minister of Industry has, for a second time, rejected a purchase of Mobilicity by Telus). This was based on the fact that the effect of the sale of the business would entail a transfer of the 2008 auctioned AWS spectrum licences to one of the big three incumbents (Bell, Telus and Rogers).

The denial was in accordance with the policy respecting licence transfers set forth in advance of the AWS auction, so it was not necessarily surprising in itself. What was surprising was that the Minister blocked the sale when Mobilicity was clearly in financial difficulty, and there were no other potential buyers other than the big three – all of whom are hungry for prime spectrum. None of the other new entrant carriers who acquired spectrum in the AWS auction was in a position to bid either to buy Mobilicity or its spectrum licences.

When it was learned that the American telecommunications giant, Verizon, was sniffing around the near-dead body of Mobilicity, a panicked chorus was heard from the big three incumbents. Their share prices dropped. In response, the big three bought full page advertisements in newspapers throughout the country, alleging that a sale to Verizon would disadvantage them as the underlying spectrum would be less expensive to Verizon that to an incumbent big carrier. The big three collected sympathetic endorsements from an assortment of the great and the good of the Canadian business world, and were given a helping hand from Canadian telecommunications sector unions, who launched their own add campaigns. The usual suspects howled on nationalist grounds against the entry of a US major.

In the course of the ensuing fray the Government came to declare that its policy intention was that there be four wireless carriers in each market – suggesting that it believes three-player competition to be too concentrated and resulted in oligarchical behaviour that denied consumers (including businesses) the full benefits of competition.

Sadly for the Government, Verizon forbore from entering the Canadian market, so it’s back to business as normal for the big three and Canadian consumers. Meanwhile, the Government sits on the sidelines without a vehicle for realising its policy objectives.

What I find most interesting is that, in taking the stand it did; the Government basically reversed the policy that it forced on the CRTC in 2007 (Order in Council, P.C. 2007–532, amending CRTC Telecom Decision 2006-15 on forbearance from the regulation of retail local exchange services). In rewriting critical portions of the CRTC decision, the Government forced the CRTC to accept that the presence of three carriers in any market was sufficient (with minor qualifications) to warrant forbearance from regulation. In doing so, it removed important powers from the CRTC to assure viable and healthy competition in local telecommunications markets.

As local telecommunications service competition has become the key to reducing consumer prices and fostering innovative services, it is obvious that the Government and the CRTC should reconsider the policy underlying P.C. 2007-532, and ensure that the CRTC can use its regulatory tools to foster greater competition in local markets. One would expect that a consumer first policy agenda would ensure that all arms of government would work together to bring about the desired result.

Given that the Government has expressed its belief that a minimum of four carriers is required to ensure adequate competition, P.C. 2007-532 should be revisited or possibly repealed.